Quinn v. Emc Corp.

• Decision Date: 21 August 2000
• Docket Number: No. Civ.A. G-00-178.,Civ.A. G-00-178.
• Parties: Gary QUINN, Plaintiff, v. EMC CORP., Defendant.
• Court: U.S. District Court — Southern District of Texas

109 F.Supp.2d 681

Gary QUINN, Plaintiff, v. EMC CORP., Defendant.

No. Civ.A. G-00-178.

United States District Court, S.D. Texas, Galveston Division.

August 21, 2000.

Gary J Siller, Griggs & Harrison, Houston, TX, for Gary Quinn, plaintiff.

Deke Wayne Bond, Brobeck Phleger et al., Austin, TX, for EMC Corporation, defendant.

ORDER GRANTING DEFENDANT'S MOTION TO STAY

KENT, District Judge.

Plaintiff Quinn brings suit against his former employer, Defendant EMC Corp., alleging causes of action under the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq. ("ADEA") pursuant to the provisions of Title VII of the Civil Rights Act of 1964; 42 U.S.C. § 1981(a), 29 U.S.C. § 794; the Americans with Disabilities Act of 1990, 42 U.S.C. §§ 12101-12213 ("ADA"); the Family and Medical Leave Act of 1993, 29 U.S.C. §§ 2601-2654 ("FMLA"); the Texas Commission on Human Rights Act. He also brings a state law claim for intentional infliction of emotional distress ("IIED"). Now before the Court is Defendant's Motion to Dismiss, or in the Alternative, to Stay Proceedings and Compel Arbitration. For the reasons set forth below, Defendant EMC's Motion to Stay is GRANTED.

I. FACTUAL SUMMARY

Defendant EMC hired Plaintiff Gary Quinn on January 5, 1998 as a Business Development Manager ("BDM"). One week after beginning work, Plaintiff signed a Key Employment Agreement ("Agreement"), which contained, inter alia, the following arbitration provision:

You agree that binding arbitration shall be the sole and exclusive remedy for resolving any dispute arising out of or relating to your employment by the Company or any alleged discrimination by the Company; provided, however, that this shall in no way limit the Company's ability to commence litigation with regard to any breach of this Agreement.

Def.'s Mot. to Dismiss Ex. A at 3.

On August 10, 1999, Defendant EMC terminated Plaintiff. Upset, Plaintiff filed suit in federal court, claiming that he had been the victim of discrimination. In response, Defendant EMC now seeks to steer all of Plaintiff's claims into binding arbitration pursuant to the terms of the Agreement.

II. ANALYSIS

At the outset, the Court observes that there is a strong federal policy favoring the arbitration process. See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 25, 111 S.Ct. 1647, 1651, 114 L.Ed.2d 26 (1991) (noting that the Federal Arbitration Act manifests a liberal federal policy favoring arbitration agreements); Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 225, 107 S.Ct. 2332, 2337, 96 L.Ed.2d 185 (1987) (observing that there is a strong national policy encouraging the use of arbitration); Life of America Ins. Co. v. Aetna Life Ins. Co., 744 F.2d 409, 412-13 (5th Cir.1984); see also Eljer Mfg., Inc. v. Kowin Dev. Corp., 14 F.3d 1250, 1254 (7th Cir.1994) (defining arbitration as "a private system of justice offering benefits of reduced delay and expense").

The Federal Arbitration Act, 9 U.S.C. § 3, "mandates that when an issue is referable to arbitration pursuant to a written agreement, the district court must stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant is not in default in proceeding with such arbitration." Williams v. Cigna Financial Advisors, Inc., 56 F.3d 656, 659 (5th Cir. 1995). Thus, in deciding whether the grant Defendant's Motion to Stay Proceedings and Compel Arbitration, the Court need only decide if the dispute is covered by the terms of a valid arbitration agreement; if so, a stay must be granted. See id.

When confronted with the question of arbitrability, a District Court must determine, as a threshold matter, whether the grievance before it is subject to arbitration. See Folse v. Richard Wolf Med. Instruments Corp., 56 F.3d 603, 605 (5th Cir.1995); Oil, Chem. & Atomic Workers Int'l Union, Local 4-227, AFL—CIO v. Phillips 66 Co., 976 F.2d 277, 278 (5th Cir.1992). This determination involves two inquiries. First, the Court asks whether there is a valid agreement to arbitrate; if so, the Court then asks whether the issue in question is covered by the valid agreement. See Webb v. Investacorp, Inc., 89 F.3d 252, 257-58 (5th Cir.1996). As to the first inquiry, the Court finds that the arbitration provision in the Agreement is valid, because it is a contractual provision supported by consideration and there are no equitable reasons to invalidate this private contractual agreement to arbitrate. Plaintiff's arguments to the contrary are examined below.

A. Did Defendant EMC Offer an Illusory Promise?

Plaintiff first argues that the arbitration agreement is invalid for want of consideration. Focusing on that portion of the Agreement permitting Defendant EMC to avoid binding arbitration, Plaintiff complains that Defendant EMC made an illusory promise to him, which renders the arbitration provision void for lack of consideration. The Court disagrees. The Agreement does not provide Defendant EMC with carte blanche power to disregard the arbitration clause and file suit for any reason; instead, Defendant EMC may only "commence litigation with regard to any breach of this Agreement." Def.'s Mot. to Dismiss Ex. A at 3. This simply means that if Plaintiff chooses to file suit rather than abide by the terms of the Agreement (which, is what in fact has happened in this case) or if he elects to improperly release, steal, or abscond with Defendant EMC's proprietary information and trade secrets, then Defendant EMC reserves the right, under these extremely limited circumstances, to enforce the Agreement by pursuing appropriate remedies in court (likely to be taken in form of injunctive relief). Hence, the Court finds that mutuality of obligation exists, because under the express terms of the arbitration provision both Defendant EMC and Plaintiff must submit to arbitration all claims "arising out of or relating to termination of [Plaintiff's] employment by [Defendant EMC] or any alleged discrimination by [Defendant EMC]." Put more succinctly, the Agreement requires Defendant EMC to be bound by the arbitrator's ruling, which Defendant EMC acknowledges. See Def.'s Reply to Pl.'s Resp. to Def.'s Mot. to Dismiss or, in the Alternative, to Stay and Compel Arbitration at 3 & n. 3 (agreeing to binding arbitration on all issues regarding employment termination and discrimination).

In addition to mutuality of obligation, other valid consideration exists to support the arbitration provision. Cf., Cline v. H.E. Butt Grocery Co., 79 F.Supp.2d 730, 732 (S.D.Tex.1999) (noting that consideration other than mutual promises may support the validity of an arbitration clause). In exchange for Plaintiff relinquishing his legal right to have a judicial forum adjudicate any employment-related dispute, Defendant EMC promised to hire Plaintiff and provide him access to the company's confidential information and trade secrets. Thus, while Defendant EMC and Plaintiff are mutually obligated to arbitrate any employment termination or discrimination claims, Defendant EMC has — in response to making available to Plaintiff sensitive company trade secrets — carved out a discrete area in which it is not required to arbitrate. It is essential, however, to remember that Defendant EMC offered valid consideration for this limited right to protect the integrity of its proprietary information and trade secrets. See Harris v. Green Tree Fin. Corp., 183 F.3d 173, 180 (3d Cir.1999) ("[S]ubstantive federal law stands for the proposition that parties to an arbitration agreement need not equally bind each other with respect to an arbitration agreement if they have provided each other with consideration beyond the promise to arbitrate."); Lawrence v. Comprehensive Bus. Servs. Co., 833 F.2d 1159, 1162-64 (5th Cir.1987) (holding that an arbitration clause was not unconscionable for lack of mutuality of obligation, despite the existence, inter alia, of a provision which allowed one party to seek judicial injunction in the case of breach); In re Alamo Lumber Co., 23 S.W.3d 577, 579 (Tex.App. — San Antonio 2000, pet. filed) (not released for publication) (finding that mutual promises to arbitrate constitute valid consideration under Texas law when the arbitration agreement allows the employer, but not the employee, to seek judicial remedies for injunctive or equitable relief); see also Barker v. Golf U.S.A., Inc., 154 F.3d 788, 792 (8th Cir.1998) (concluding that "under Oklahoma law, mutuality of obligation is not required for arbitration clauses so long as the contract as a whole is supported by consideration"), cert. denied, 525 U.S. 1068, 119 S.Ct. 796, 142 L.Ed.2d 659 (1999); Pridgen v. Green Tree Fin. Serv. Corp., 88 F.Supp.2d 655, 659 (S.D.Miss.2000) (stating that under Mississippi law mutuality of obligation is not required for an arbitration provision to be valid if the underlying agreement is supported by consideration). Consequently, the basis for the bargain turns on Plaintiff's access to confidential information, which Defendant EMC permitted in return for the right to protect company trade secrets in court. There is simply no illusory promise.¹

The Agreement does not, as Plaintiff suggests, provide Defendant EMC with an unfair windfall that works to the detriment of Plaintiff; in fact, the Agreement forces Defendant EMC not only to arbitrate the very same types of claims now alleged in this case, but also to make confidential data available to Plaintiff.² The Court further finds that by acceding to binding arbitration in its Motion briefings, Defendant EMC has satisfied the consideration requirement. See, e.g., Michalski v. Circuit City Stores, Inc., 177 F.3d 634, 636-37 (7th Cir.1999) (recognizing that a "promise [by the employer] to be bound by the arbitration process itself serves as mutual consideration here"); Johnson v. Circuit City Stores, 148 F.3d 373, 379 (4th Cir.1998); Wright v. Circuit City Stores, Inc., 82...